ASSESSMENTS

Reforming Southern Europe: What's Next?

Sep 26, 2018 | 09:00 GMT

Italian Prime Minister Giuseppe Conte, left, speaks with French President Emmanuel Macron during a summit on migration issues at EU headquarters in Brussels on June 24.

Italian Prime Minister Giuseppe Conte, left, speaks with French President Emmanuel Macron during a summit on migration issues at EU headquarters in Brussels on June 24. Italy, France and Spain are all trying to make reforms amid a variety of challenges.

(OLIVIER HOSLET/AFP/Getty Images)

Highlights

  • Italy will likely respect the European Union's deficit limits in its new budget, but the change of direction from deficit reduction to deficit increase could frighten financial markets about the sustainability of the country's debt.
  • A controversial pension reform proposal in France will create temporary economic disruptions as different groups protest the measure, but Paris will likely push ahead with its plans regardless.
  • The new Spanish government will aim to reverse some of the austerity measures of its predecessor, although the administration will face the constant risk of collapse.

The eurozone's largest Mediterranean members are heading toward choppy seas as 2019 approaches. In Italy, plans to cut taxes and increase spending will make financial markets nervous about the sustainability of the country's debt, while in France, a controversial pension reform proposal will once again prompt the French to take to the streets. Over the border in Spain, the minority government will push for a higher deficit but will struggle to get things done. As all three countries consider delicate economic measures, the risk of blowback from their own populaces, as well as from international investors, will be high....

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